Bitcoin rally that may FAIL and destroy Bitcoin market fundament.
Welcome to this week's update and outlook on bitcoin.
Now Fridays, sell off on bitcoin. As you can see here, certainly managed to freak out and scare a lot of traders, a lot of bitcoin investors and traders. But I want to show you actually this drop that you see here was actually quite normal and actually nothing really to be scared about.
Now, let me just put this into context. You see in early April we formed this bottom that you see here this low and then finished to have a nice rally off that bottom. We went through these highs near just about the 9,600 level and what we've seen so far. Let me just bring us a bit closer. What we've seen so far is after this rally, it appears that we're now making a correction, a pullback, and as you can see it rested, arrested, right on top of that 200 moving average at Green Line.
You see right there. As a matter of fact, it held a level very nicely. Now I'm making this video right now on a Sunday, and as I can see it right now over the last couple of days, price has a managed to recover. So bitcoin prices right now as I'm making this had managed to recover bounce. And we're now above the 8,600 level here. Now there is a second reason why that is significant.
So let me just explain that you see on most charts there is a tool that you can literally find again is on most charts go FIBONACCI retracement right there. So we're going to grab that and we want to do here is just click left, click and then draw it from the low, OK, from the significant low to the most significant tie right there, OK? And then what you can see that this tool shows to these important levels on your chart and the levels I look at specifically are these 38 point two and the 61 point eight percent right now, these are what's called the FIBONACCI ratios.
Bitcoin most important FIBONACCI ratios
Actually this is also a very important ratio, 23 point six, but for me these are the two most important ones. 30 eight point two and the 61 point eight percent FIBONACCI ratios. Now, in case you're not familiar with what FIBONACCI is, a no, it's not some Italian pasta dish, although that would be nice. Actually, many years ago at I'd say about two centuries ago, scientists discovered that there are certain numbers in nature that are not arbitrary. They're not random. They actually have a special meaning. There's something special about these numbers and they found that certain ratios in nature have this specific sequence. This number, this ratio, for example, the ratio between your hand to your arm is based on this ratio. The 38 point two to the 61, eight percent. Same goes with the ratio of your joints on your fingers. Again, 38 point two to the 61 point eight percent.
Now, just to quickly explain a bit more about this Fibonacci sequences, the FIBONACCI ratios. The idea is that after a market rally like this, OK price often retraces 38 point two percent of its previous swing high. OK? If previous rally right now, sometimes the correction or the pullback or retracement, if you want to call it that, can be bit more than that. Could be 61 point eight percent. OK, so these are the typical ratios. 30 eight point two percent retracement. The previous rally or 61 point eight percent of the previous rally. Again, remember these are Fibonacci sequences, Fibonacci ratios. They're not arbitrary, they're not random, they're actually significant in nature. And of course also in the markets. And the idea is the theory goes that after these retracements, whether it's 38 point two or the 61 point eight, the market then usually continues its former rally.
In other words, it continues to move in the direction of its former. The previous rally that we had there. OK, by the way, so you're probably asking, well what about the 76 or 76? I'll come to that in just a few moments now. So we can see here. Bitcoin has managed to make this rally, so bitcoin has managed to now retrace down to the 38 point two percent. As I just said, it's also I'm going to bounce from that level as well. Now, this is actually important to appreciate because firstly that couldn't essentially mean it could be the sign that we're heading for the continuation move higher. OK, but it's possible somebody probably ask him right now and it's a good question to ask, well, what happens if bitcoin continues to move lower down to. In that case, we need to see buyers stepping in and actually holding that level.
Let me just change the colour of this. This level is going to be very important. The 61 point two percent, if bitcoin fails to gather momentum and fails to continue moving higher and instead it comes back down to its 60 percent Fibonacci ratio level, which by the way right now is about, seems to be about [inaudible], but it looks at it all right? If it comes down to that level, that's going to be the last bastion of support for bitcoin. OK? What must not happen is a bitcoin must not fall below that level, below the [inaudible] level, because if it does, that increases the probability of a move down to these lows, a February to about 85 to 90 percent. Alright? In fact, we've seen many times that when price drops below a 60-point percent Fibonacci ratio, that opens the door to a great probability of a move down to its previous low.
Now I know there's some people watching this video, probably FIBONACCI purists or fundamentalists. All right? And I'm sure they're shouting at their screens right now and saying, hang on a second here. That's all wrong because what about the 76 point four ratio? What about the 78 point six percent ratio a? Yeah, good luck with that. You'll see guys, what happens is a lot of folks go and read these books about Fibonacci and uh, you know, a chart analysis and they're read about these different ratios like 76 or 78 point six. And they think that these things really are important. The markets have changed and evolved a lot in the last few decades. So yeah, look, put it this way guys, here's why I don't really care about those specific. Um, uh, and I just want to burst the bubble of anybody who thinks that those specific numbers, uh, this, this, this specific ratio matters.
I don't really care about the 76 points, four or the 78 point six. Here's why, as I've just explained by the time price drops below 60 percent when we fall below that, the odds greatly increase of a move down to test the previous low. All right? I don't really care at that point. If price drops below 61 point eight percent, I don't really care about staying in the market. In other words, I don't want to be in the market. I'm going to be out because that essentially increases the risk of a trade that's going to go against me of a movement that's going to go against us all. Another one be that. Let me just think with this. By the time the price has retraced below 61 point two percent level, as I just explained, the odds greatly increased. That we're going to go head back down to the previous lows and we may even go below that level.
All right, so no, I'm not interested in being in the market and holding my trade, holding my position once the price has fallen below the 61 point eight percent. And that's a bit like betting on the losing team when clearly you are losing team is losing. All right, so it's. This is what I'm talking about. So guys, bottom line is that I don't really care what the textbooks say. I don't really care what the purest, the fundamentalist says about FIBONACCI. Once the price has fallen below that level, I'm out. I don't really care. I'm not interested. So yeah, good luck with the 76 point four, seven, eight point six percent, whoever, whoever likes that kind of stuff. But bottom line is this guys, these are the two levels we want to watch the [inaudible] and the 61-point percent good news is guys, as I'm making this video that bitcoin has managed to so far, you know, come down to the 200 moving average.
We'll manage to bounce off that level and again, as I just explained, we're above roughly above. Let me change that colour roughly above these, uh, 8,600 level there. Let's see if we can maintain momentum and actually move higher above that. All right? But so far, so good buyers have stepped in and the 38 point two percent is being protected, which is exactly what we want to see a but as unexplained to four. If they're rally fails. And then we fall back below that 30 point two fold back here to the 61 point eight, that's actually a warning signal because we must not fall below that level. OK? We must not fall below that 60 [inaudible] or the 7,700 level, uh, because if we continue to fall below that level in a previous video that I made a. and again, if you haven't seen it, go ahead and watch it again.
It's the one here is called the dangerous pattern. Bitcoin must avoid in that video I explained that one of the symptoms and unhealthy market, one of the symptoms of a market that's going to drop and potentially drop significantly down further is what's called failed rallies and you can see this what happened many times before to other markets to and including bitcoin as well in the past when you see rally and then a failed rally and then another failed rally. Another failed rally here has gotten so failed rallies. Guys is a terrible, terrible sign for the market for any market. You can see that so far we've had one rally, we just failed and this is the second rally. This rally must not fail because of this rally fails and we fall back down to lows. There's a good chance we might actually break that level.
All right? That's for the reasons I've explained. Failed rallies are not a good sign for a market. All right, so we want to see this rally gathering momentum and we want to see this pushing higher. If it fails and we fall below the [inaudible] level, then that will increase the probability for move down to the February pillows and again, if we fall down to those lows, we must not break that level because that would be breaking market structure, which of course will have devastating consequences are guys so far so good and I hope this video helps and guides it has helped us go to thumbs up and also please remember to subscribe to our videos, so future updates as well. Thank you very much indeed and we'll see you guys in the next update.